I'll lob in another hand grenade courtesy of Antal Fekete. His view is the Fed's effort to reflate are stuffed because they make it too easy for speculators to take all that money & profit on the spreads on the bond market. So, the money doesnt get out into the real economy to bid-up prices.
My reponse to him is he should check out the Australian economy. US dollars reaching China are increasingly being used to buy our commodities. US-centric inflation has effectively been exported to us via China.
Business investment is definately falling here (see the RBA website for data). Deflationists correctly argue (in my view) that the fractional banking system is broken when businesses wont take up credit.
But I still cant take the next intellectual leap & conclude we will get deflation because of this. Governments CAN promote spending imo if cash is handed directly to the spenders, or if its provided in the form of credit for a product the spender still demands. This happened here in Australia in 2009. First Home Buyer grants made the housing market just explode with activity. Unbelievable, but it happened. We got cash handouts too. Retail activity exploded, but now it appears to be tapering off with the end of the stimulus (See Woolies recent retail figures).
I would like to believe we will have a deflationary collapse. It will reward holders of cash and gold. But I hold gold & gold equities, just in case the insanity that is government succeeds yet AGAIN & pumps the whole mess up one more time.
I cant predict the future. You fellows out there dont know the future either. Im alternately amused & frustrated at the writings of others here who emphatically claim things will go one way or the other. We would be better served discussing ways to hedge risk for either eventuality, rather then batter each other with polarised opinions.
Cheers, rant over.
Read it, its very good.
http://news.goldseek.com/GoldSeek/1265726186.php
Add to My Watchlist
What is My Watchlist?